Shore Capital share price rises despite scrapping its dividend as chief executive warns the outlook for markets may not improve
Shore Capital's share price has risen in trading today, despite the company axing its dividend and warning challenging markets could continue.
The company reported strong profit growth in its preliminary results for its year ended December 2015, mostly due to the sale of a number of radio spectrum licences in Germany to Deutsche Telekom AG.
The sale of six licences accounted for almost 50 per cent of profits for the year and leaves Shore Cap holding 32 further licences.
Including the licence sale, profits before tax increased to £11.7m, up 40.8 per cent compared with £8.3m the year before. Revenue nudged up to £42m, up 3.4 per cent from £40.6m in 2014.
Despite ditching the dividend, Shore Capital's founder and chief executive Howard Shore was keen to stress the company returned capital of £10m to shareholders over the past year.
The volatility in global markets took its toll on the business however and Shore warned problems could persist.
"I'm not sure it's going to get better, but I wouldn't like to say it's going to get worse either. As economies slow, businesses can improve," Shore told Morning Wire
Revenue from capital markets decreased by 22.5 per cent to 23.4m due to wild market swings seen in the second half of 2015 and early 2016.
Pre-tax profit at the capital markets division slumped by 51.8 per cent to £4.7m, despite being the most successful AIM fundraiser during the year, picking up a FTSE 100 client in supermarket Morrisons, as well as Irn Bru maker AG Barr and Dairy Crest Group.
"I'm always concerned. If you run a financial services business the key is to think about risk as well as opportunity. We're always thinking about what could be around the corner," said Shore. "I've said for some time that I'm concerned about global growth. The slow down in China isn't the only problem. Western economies are struggling and monetary policy isn't working in the way central banks had hoped. There's been a lot of money lost around the world in recent months."
Shore has blamed much of the company's problems capital markets throughout 2015 on uncertainty ahead of last years general election and a subsequent failure to recover in the second half of the year though Shore, who has already come out in support of a British exit from the European Union in June's referendum doesn't think a vote to leave will impact the company.
"I'm of the view that Brexit is a good thing, and the immediate landscape [for businesses] post Brexit won't change. I think most large corporates think that it has medium to long term repercussions but there would be little immediate impact in the short term. Businesses will carry on the same way the next day," he said.
"A vote to leave the European referendum won't mean we're more or less likely to pay a dividend next year," Shore added.
The asset management and principle finance divisions lead the company in 2015.
Principal finance posted £9.1m revenue and generated profits of £5.1m, while asset management recorded sales up 12.1 percent to £9.5m and an 11.4 per cent rise in profit to £2.7m.
Shares in the company were trading up almost one per cent at 401p in early afternoon trading.
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"Shore Capital, as well as other brokers, are still benefiting from the pull back from the space by the big banks. Today the reality is that big investment banks are simply not interested in severing companies outside the Euro 50," Shore said.
Shore Cap last year took on a debt team and new fixed income specialists from Edmond de Rothschild's UK business during the latter half of 2015
"We're always looking for more people and often take on the best people in difficult markets. We'll be looking to grow our new additions from last year," Shore said.